Most Americans dream of owning their homes free and clear, making it part of their retirement nest egg. Yet for many, this dream slips further and further from reality as they break into their home-equity piggy banks.

“I’m somewhat surprised at the number of our loan applicants, even many of our excellent credit quality customers, who have taken equity out of their homes over the last few years via cash-out refinances or home equity loans,” says Gary Miller, a 25-year veteran of the credit industry and CEO and co-founder of FirstAgain LLC, a financial services company based in San Diego.

“Now, with larger mortgages and often less equity, particularly with the recent home price depreciation hitting many areas of the country, these people face a longer and more difficult path to debt-free home ownership.”

Before you decide to borrow against your hard-earned home equity, consider the following:

♦ Are you using your home equity for something that actually adds value (equity) to your home, such as a remodeling project or a swimming pool, or for something important in your life such as a child’s education or unexpected medical bills? This can be a prudent way to finance such expenditures. Home equity loan rates are attractive and the interest is usually tax-deductible if you itemize. However, if you’re using your home equity to finance vacations or pay your bills, think again, as you might be overextending yourself.

♦ Are you using a fixed-rate home equity loan with the shortest term you can easily handle? Adjustable rates make sense for wealthy and financially sophisticated borrowers, but for most people, a fixed rate with its fixed monthly payment is the better alternative. Paying off your loan sooner builds your home equity faster and prevents future-payment shock. Think of it as forced savings.

♦ Cash-out refinances make sense if you’re improving your overall mortgage terms and using the cash for a good purpose. Again, consider shortening your loan term if possible.

♦ Are you thinking about a home-equity line of credit (HELOC)? This product is marketed like a credit card with adjustable teaser rates, ease of use and other incentives, encouraging you to use your home equity for just about anything, with long repayment periods. Be careful. A HELOC might be prudent for some purposes, such as a future emergency. But you must use it with caution and pay it down quickly.

♦ If you have excellent credit, you might qualify for an attractively priced unsecured loan that doesn’t require pledging the equity in your home. This type of loan, such as FirstAgain’s AnythingLoan, offers highly competitive, fixed interest rates and an ease of use not available with mortgage products. Entirely online and paperless, you can apply in the morning and have $10,000 to $100,000 in your account by the afternoon. It takes just minutes instead of the days required for a mortgage loan.

“Given the more difficult lending environment caused by the recent sub-prime meltdown, home equity products have become both more expensive and more difficult to obtain as lenders tighten their credit criteria and loan-to-value guidelines,” says Miller. “Our product represents a great alternative for those with excellent credit who don’t have a home-equity loan option.”

To learn more about FirstAgain and its AnythingLoan, visit www.firstagain.com.